What's AOL Worth in a Web 2.0 World?
This week regular contributor and Twitter friend Paisano decided to give Yahoo/delicious a break and take on AOL. I asked him to do a post on why AOL was still valuable from a techie's point of view, given the talk of selling off parts and who would buy them, at what price. It turned out to be a pretty hard assignment! As always if you'd like to write a guest post for sarahlacy.com contact Olivia at Olivia at sarahlacy dot com. Enjoy!
In researching what AOL has to offer in today's web 2.0 climate, I was stunned to see how little they had to offer. It was baffling to see so few popular services from the once and mighty online kings. It leads one to ponder how relevant America Online is anymore. Let's examine closely what they provide America and the world these online, shall we?
AOL's Value
As the Yahoo-AOL rumor heats up, Time Warner has reportedly given AOL a
$10 Billion valuation
not even counting its dial-up services, so it must be worth something,
right? Well, that all depends on what you consider value. Contrary to
Time Warner's generous estimate, the Wall Street Journal thinks AOL
isn't worth more than $3 or $4 Billion based on Ad-sales and business
content. Either way, it's still a big chunk of change. Still, where's
the beef? Meaning, what does AOL have to offer the online world besides
traffic generating marketing?
Bad AIM
Ameria Online used to be the masters of dial-up
internet. It also had the best instant messenger service otherwise
known as AIM. For many years they rejected all of the rejects to open
up their IM platform so other services could work with it. They even
went out and bought ICQ which was a competitor. By the time they gave
in to pressure from the masses and opened their platform it was too
late. Other players appeared on the scene and stole the show such as
Meebo
which works within a browser with all of the major messenger services
as well as AOL. The only hope for AOL is their recent announcement of
an Open AIM platform which will include revenue sharing. There are an
estimated 80 million AIM users so the numbers are there.
NetScraped
In an ironic twist of fate, the former number one
internet service became owners of the former number one internet
browser, NetScape. Unfortunately, AOL could not keep the former king
alive and pulled the plug officially in December 2007.
Too Little Too Late?
AOL recently acquired an interesting lifestreaming startup called
SocialThing which is a lot like
FriendFeed.
SocialThing is in essence a social networking aggregator which is the
hottest thing right now on the web 2.0 scene. Why did AOL buy a service
that was still in private Beta and didn't even work on Internet
Explorer yet? Rumor has it they want to use the developers to update
their stale old buddyUpdate service. We shall see soon what becomes of
it. [
ed. note: When I was at AOL last month, Frank Gruber was talking about some innovation here, I believe. Hoping Mr. Gruber weighs in in the comments, or better writes a rebuttal on why AOL is worth something in a Web 2.0 world...Frank?]
Circling the Drain
The obscene amount of money ($850 Million) AOL spent
for the social network BEBO in March 2008 still has everyone scratching
their heads. No one knows why they made this move and the jury is still
out on whether or not anything will ever come of it.
More rumors abound for another once promising AOL
online storage service called XDRIVE. After spending a reported $30
Million for the service three years ago, they are trying to unload it
for $5 Million and its value is dropping by the minute.
The Defening Silence
In doing this research I asked the everyone I knew
online what they considered useful and vital from AOL and the response
was shocking. I got mostly silence! That takes some doing with my
otherwise VERY vocal and noisy group of friends online. No one had
anything nice to say about AOL services. The only thing I got were
jokes about missing all the free CD's AOL used to send in the mail (OK,
I was the one who said he missed the coaster collection I had with their
CD's).
The Verdict
So will AOL be relevant again? Can they rise from the
ashes like the Phoenix or continue to sink into the corporate
primordial ooze in Time-Warner's swamp? The best move for AOL would be
to get out from beneath the clutches of their behemoth ruler. Whether
it's Yahoo, Microsoft or any other tech organization, AOL's future
would be better served with more technological master.
You can follow this conversation by subscribing to the comment feed for this post.
AOL is worth ZERO in today's market.
Talk about a company that was so full of itself that it got too lazy and too slow to keep up or keep relevant.
AOL was once the spoon-feeders choice of content (I sw it on my AOL Home Screen), but once the web moved to a micro-content format, AOL quietly sat and twiddled their thumbs.
Sure, Time Warner may have petabytes of content to sell or distribute, but AOL is clearly NOT a pipeline to reach people.
Sell AOL off for their server farms, empty office spaces, and content management systems, since we know there isn't an innovative idea to be BOUGHT at an AOL campus.
Posted by: Mikehill33 | August 11, 2008 at 07:46 AM
Minor error makes a big difference in meaning.
Where it says Million it should be Billion.
"Time Warner has reportedly given AOL a $10 Million valuation ...
...the Wall Street Journal thinks AOL isn't worth more than $3 or $4 Million..."
Posted by: David Damore | August 11, 2008 at 07:59 AM
thanks for the million-billion catch! i fixed it. paisano is REALLY hard on AOL if he thinks it's not even worth $3 million, huh?
;)
Posted by: sarah lacy | August 11, 2008 at 08:05 AM
This blog post doesn't mention AOL's online advertising network (Platform A), which covers 90% of the Internet (the biggest online advertising platform). And it makes no mention of AOL's online content, which includes WebLogs Inc. (Engadget, Joystick, etc.), or AOL's commerce websites (AOL Shopping, AOL Autos, etc.), which generate a huge amount of revenue for the company.
AOL has ditched its dialup business, which is great for the brand. No longer will the two be synonymous.
Since this blog post only focuses on AOL's acquisitions, it should also mention that AOL owns MapQuest (which I believe is still the most used mapping website on the Internet), as well as WinAmp, Truveo, and recent acquisitions Goowy, Userplane, and Yedda.
But again, AOL's focus has moved towards online advertising, and its content sites help bring in a ton of revenue.
I agree that AOL doesn't seem to be innovating very much in the Web 2.0 world, but they still have an incredibly huge audience and know how to cater to this mass audience.
[Disclaimer: I work at AOL.]
Posted by: Michael Tolosa | August 11, 2008 at 09:31 AM
happy to see you weigh in michael! paisano: reaction?
Posted by: sarah lacy | August 11, 2008 at 09:34 AM
Michael,
No need for the disclaimer, I kinda sensed as much. :) Anyway, I'm also glad you chimed in. All good points and important to consider when determining AOL's worth. I was mostly focusing on AOL's worth and innovation in the web 2.0 and beyond space which you admitted has been lagging. Still, just because a company has decided not to innovate in one space doesn't mean they're not doing so elsewhere which as you stated so well they are (online advertising/marketing and content). Can't believe I forgot about MapQuest and that it did not show up on any searches that I did for the article. I think it will be very interesting to see what happens with Yahoo and AOL whether or not they become strange bedfellows. Will Microsoft woo AOL as that rumor continues to grow? One thing is clear, AOL does have a massive audience. In that respect, the numbers don't lie.
Thanks again for contributing to the discussion. It only adds value to the conversation when useful information is thrown into the ring as you have done so.
Pai
Posted by: Paisano | August 11, 2008 at 02:05 PM
I recently came across your blog and have been reading along. I thought I would leave my first comment. I don't know what to say except that I have enjoyed reading. Nice blog. I will keep visiting this blog very often.
Posted by: jeff paul internet marketing | December 29, 2008 at 09:51 PM